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Posted by on Dec 1, 2009 in At TMV | 17 comments

GDP Growth — The Never Ending Idiocy

Almost any news report about the economy these days will contain some variant of the following phrase: “GDP numbers show the economic recovery has begun, but its effects have not yet trickled down.”

Read this over carefully. Think about it. Hard. Because it pretty much explains the fundamental problem with our current economy, and by the way, why in a real sense an economic recovery hasn’t really begun.

If the GDP has in fact increased and its effects have not “trickled down,” it must mean that the extra wealth created is stuck at the top of the economic system. A relatively few individuals and institutions have gotten the increase, in other words, while the rest of us are still waiting for the trickle.

That might not be so bad if it were just a temporary aberration. It isn’t. Spreading the wealth in this country equitably stopped decades ago. The middle class and people less well off have seen little or no improvement in their own actual wealth — even a loss of wealth. The reason this was not apparent for a number of years was that borrowing by the trickle-hungry citizenry allowed greater spending temporarily, which made it seem that most peoples’ standard of living was increasing when it was only their debt that was growing, while the top rungs of the economy were the only ones actually pulling in increases.

That’s the economic system both Democrats and Republicans have fashioned for us over the years. A system being promoted so aggressively these days by Goldman’s Boy, Tim Geithner at Treasury. And it’s also a system that the press continues to abet by repeating endlessly that an increase in national wealth, an increase in the GDP, is a positive thing that just “hasn’t trickled down yet” — as if it inevitably will — which as the history of the past few decades suggests (as Henry Ford might have opined) “is bunk.”

One other thing might be noted about the recent increase in GDP, first reported as 3.5 percent and just a week or so back modified to just 2.8 percent in the last quarter. Either number if terrible. Absolutely terrible.

If after the government of the United States has sunk literally trillions of borrowed or printed dollars, directly or indirectly, into pumping up the economy, and only gotten a pathetic 2.8 percent increase in the GDP out of this investment, and if even this titanic sum to achieve this piddling result is no guarantee there will be future GDP increases any time soon, then what we have here might better be described as rouging a corpse not priming a pump.

Ah, well. It appears that at least we’ll have more years of bad news from our endless national craving for war fighting in exotic lands to provide distractions from the coming bad economic years generated as much by GDP idiocy among policy makers as flamboyant greed by these policies’ beneficiaries.

GDP numbers are really just the official rationale-cum-excuse for an inherently flawed and failed national economic policy. And until GDP growth begins to be allocated fairly, that how these numbers should be viewed.

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  • dduck12

    I always get confused, is it trickled down or is it tinkled down?

  • dgfunk

    “Spreading the wealth in this country equitably stopped decades ago. The middle class and people less well off have seen little or no improvement in their own actual wealth — even a loss of wealth.”

    Excellent point. Slowly strangling the middle class (aka the consumers) really isn’t good policy for any anybody’s economy. But be prepared to be assaulted with the charge of socialism from those who conveniently forget that the past 30 years have already seen a significant redistribution of wealth (from the bottom up).

    • casualobserver

      I don’t need to call it socialism, when I can just call it b—sh-t.

      When, in the last 30 years, have you, dgfunk, provided me, casualobserver, a distribution of “your wealth”?

      • TheMagicalSkyFather

        If you are part of the top .01% I would say anytime he spent money for the most part. If you are not part of the top .01% then you both are donating to them in most situations where you spend money. The same is also true though every time we print more money, our cut is less and due to interest theirs is more. I really think they called it trickle down because p*ss on the poor and middle class seemed like bad PR.

        For some reason we get caught up about those that have money when the real problem is multi-generational wealth accumulation but of course no one wants to fix that instead lets just attack one another every four years about the evils of progressive taxation and inventing new money when we have no choice but to do one or the other unless we prefer the lower classes to pay with chits.

      • TheMagicalSkyFather

        Also I thought you worked with stocks? If so every time he paid taxes you got a cut, part from the military industrial complex keeping a hold on the global “free market” and the other part from the bail outs and programs that went to enrich wall street. I may have you confused with someone else though so I apologize in advance if so. Either way those that make their money from investments are supported by our tax dollars and our enforcement of IMF policy and the like. It is socialism but its only for the rich. Personally I prefer 100% inheritance tax no bail outs and that is all but if we are going to play the silly socialism card I will remind people that we are already there its just only a small percentage benefit and only a tiny percentage do really well off it.

    • Dr J

      Slowly strangling the middle class (aka the consumers) really isn’t good policy for any anybody’s economy.Completely agree. What we’re doing obviously isn’t working, at least as far as helping the middle class goes.

  • Silhouette

    Agriculture. It’s the best bet we have. Everyone needs to eat..

  • ProfElwood

    The people doing the best work should get the pay. There’s no way that .01% of our population is doing over half of the work.
    dgfunk is right, the entire economy suffers when people can’t buy the goods that they’re producing. Henry Ford wasn’t perfect, but he understood the importance of making sure that his workers made enough to be able to buy his products.

  • tombeecroft

    Michael, I think you’re confusing economic recovery with wealth distribution. The data show the recovery is pretty broadly based, not focused at the top. In the September quarter, consumer purchasing increased; home purchases and housing construction increased; exports increased. Hours worked are also increasing. This is all quite broad, and benefits all employed persons. There is no ‘trickle down’.

    However, it still feels like a recession because the downturn is fresh in people’s minds. The fact that the economy is recovering does not erase the pain of the last two years, and most people are therefore still quite cautious.

    Because income distribution has become somewhat more concentrated at the top, those at the top will benefit disproportionately. But despite all the press about bankers bonuses, overall pay on Wall Street is still well down on prior years, and this is not a trickle down recovery.

    http://www.viewfromdownunder.com

    • michaelsilverstein

      Hi,
      I appreciate you taking the timne to comment on my piece but I find your criticism of my perspective odd — to say the least. You say this recovery is “pretty broadly based.” Why? Because consumer purchasing increased in the last quarter? It did this because of the government clunker program. Because home purchases have increased recently? Also due completely to a government buying incentive program. Alas, if only the government giving away money (other people’s money, your money and my money), then endless prosperity could be generated by Washington largesse. It doesn’t work that way.

      Your most astonishing comment was that “this feels like a recession because the downturn is fresh in people’s minds.” Do you eally believe we are suffering from some kind of mass delusion? That increasing unemployment, increasing foreclosures. food pantries the present national growth industry, people queued in mall parking lots for a chance at some free medical care — is this all “in people’s minds?”

      Income distribution in this country is not, as you note, “somewhat more concentrated at the top.” It’s more concentrated than it’s been at any time since at least the Great Depression. And the notion that “overall pay on Wall Street is still down on prior years” is an assertion I find incomprehensible.

      We are not dealing today with a need to jolly people up. They aren’t hallucinating. They are hurting. more of them, daily, because of horribly mis-focused priorities. That’s the way it is. That’s what has to be fixed.

  • sandymchoots

    You have a fascinating view of the economy, ProfElwood, believing as you do that 99.99% of the U.S. population works despite that fact that they “can’t buy the goods that they’re producing.” I wonder who it is that makes the goods that the bottom 99.99% actually does buy. The Chinese, I suppose, ever willing as they are to ship us textiles in exchange for Treasury notes.Oh, and you ought to have a sidebar with Magical Sky Father, who is quite sure that the top 0.01% spend so little of their income that “the real problem is multigenerational wealth accumulation.”It’s amazing that we’re not all collapsing daily from the strain of working to produce goods that 99.99% of us can’t afford and that the remaining 0.01% refuse to buy so that they can leave their unspent income to their bratty kids, who will in turn not consume it all either.It’s all so confusing, especially when I read elsewhere that overconsumption by Americans is killing the planet.

    • ProfElwood

      You have a fascinating view of the economy, ProfElwood, believing as you do that 99.99% of the U.S. population works

      That’s an interesting way to read what I wrote. I was also exaggerating, I must admit. So here’s some more specific numbers:
      http://www.absoluteastronomy.com/topics/Affluence_in_the_United_States

      This article included capital gains in the mix, before tax.
      http://www.scribd.com/doc/18567271/US-Income-Distribution-2007

      No, many people don’t work, I understand that perfectly well, I see people who live off of a combination of occasional cash only work, parental support and/or welfare quite often.

      At the same time, is a member of a board of directors who’s getting paid $1,600,000 per year worth as much to a company as 40 employees getting paid $40,000?

      All that I was trying to say, was that the economy works best when those who are doing the work get the wages.

  • tombeecroft

    Michael,

    The data is pretty clear that the economic recovery has begun. This is being reflected in more hours worked, which increases pay over a broad spectrum and not just at the top. It is being reflected by more homes being built and renovated, which increases work for tradesmen and suppliers and not just bankers. It is being reflected in more commissions for sales people, and so forth. My point was that it is not a trickle down recovery – at least according to the data.

    But the fact that the economy is recovering does not mean that unemployment will immediately drop, as that is of course a lagging indicator. And the fact that the US has endured 2 years of a very deep recession means that people will not “feel” the recovery until it is probably a year old or more. Therefore it still feels like a recession even though recovery has begun.

    http://www.viewfromdownunder.com

    • mikkel

      tombeecroft:

      I am unsure where you are getting your information. The BLS has average weekly hours of production workers at 33.0, which is the low point of this recession. It did rise from 33.0 to 33.1 in July/August, but then retreated.

      The “aggregate weekly hour index” is at 98.3 and has had a continual decrease.

      Here is another way to look at that last one.

      Moreover, construction spending is barely flat and is expected to start declining sharply again.

    • michaelD

      the last report i saw said that hours worked in the US remained at 33.1 .. its not improving.i had a look at your site, which i won’t bother visiting again, and read —“I can’t find many journalists, politicians, or even bloggers willing to go on record that the recession is over, even though technically it is.”— which you apparently wrote on or about 15 november. to the first point, you obviously aren’t paying attention. you can’t turn on cnbs [aka cnbc without hearing yet another kudlovian or knealian recitation of the popular mantra, “the recession is over.” its not just there either. the popular media is flooded with such senseless exclamations. the second point, there is only one circumstance, which i believe to be in effect, which would signal a technical end of the recession, and i’ll get to that in a moment. the recession is not ‘technically over’ by any stretch of the imagination. if you call a trumped-up 2.8% GDP gain a ‘win’ then we’re better off with you in australia. given the M-A-S-S-I-V-E stimuli the gov’t has pumped and continues to pump, thats it? thats the best we could come up with? btw, the 2.8% read was revised downward from the previous 3.5% [lie] and will likely see yet another downward revision when the final is issued. NBER has not indicated in any way shape or form that the recession ended. as to jobs, here we are in the midst of the holiday shopping season and we’re still loosing jobs. we should be piling them on at a furious rate due to all the part-time temp workers. as it is, the only reason we’re seeing any mitigation to unemployment is because of all the discouraged workers who have flat-out given up looking and who aren’t counted any longer. november ISM numbers moved downward, as reported this morning. still more green shits, i presume? go have a gander at the federal and state sales and income tax collection statistics. they’re ‘clean’ information and not adjusted for seasonality or anything else. they continue to indicate that things are clearly in the worser camp and not anywhere near ‘less worse’.the recession is over? yes, probably it is. it ended with the onset of the depression several months ago.

  • DLS

    Obviously what the feds have tried so far has failed. They’re getting ready for a “jobs forum” (unless they conveniently neglect this, now, perhaps because of the “need” to rush to “solve” the “health care crisis” now that Afghanistan has been decided) and the big question is what, if anything, different they will do as a result of this forum (assuming it’s not just another ObamaCo PR stunt), for doing something different (more of the same does not count!) is an implicit admission (at least) of what should have been admitted explicitly.

  • DLS

    “It’s all so confusing, especially when I read elsewhere that overconsumption by Americans is killing the planet.”

    We have obese Americans (whose dimensions, as well as those of their vehicles and their homes and the stores they shop in) are the butt of left-wing caricature-and-stereotype vicious jokes all the time. This, at the same time “food security” (to use a currently-popular emotional-appeal phrase) is a “crisis” with more people than ever, too, as the news and lefties remind us loudly.

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